Passionate about IP! Since June 2003 the IPKat weblog has covered copyright, patent, trade mark, info-tech and privacy/confidentiality issues from a mainly UK and European perspective. The team is David Brophy, Birgit Clark, Merpel, Jeremy Phillips, Eleonora Rosati, Darren Smyth, Annsley Merelle Ward and Neil J. Wilkof. You're welcome to read, post comments and participate in our community. You can email the Kats here

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Wednesday, 26 December 2007

The IPKat found this decision a little while ago on subscription service Lawtel, but has only just caught up with it. It's Eli Lilly & Company and Lilly Icos LLC v 8PM Chemists Ltd, a Chancery Division for England and Wales decision of Mr Justice Mann on 23 November.

Eli Lilly made and sold prescription drugs under its trade marks. PM, a UK-based business, ran an operation that enabled US customers to buy Eli Lilly drugs cheaply over the internet. This was done in the following manner: customers would place orders on a website. The drugs were then supplied from Turkey by a Turkish supplier having first been repackaged under "anonymous" packaging. Thus repackaged, the drugs would be sent to PM in the UK, from where they would be dispatched to individual customers in the US.

This dispute arose after UK Customs officials became suspicious that some of the drugs in one consignment might be counterfeit. Eli Lilly was granted an ex parte injunction restraining the use that PM could make of the goods in that particular consignment, as well as a Norwich Pharmacal to require the disclosure of information concerning the consignment's origins.

Before the court on this occasion was the question whether Eli Lilly had an arguable case for trade mark infringement. This in turn depended on whether PM was importing or exporting products in relation to which the trade mark was registered, contrary to the Trade Marks Act 1994 s.10(4)(c). According to PM, (i) there had been no trade mark infringement since the goods had been brought into the UK under the inward processing relief system and all were intended for re-export. If there had been no import, there could not have been any export; (ii) Eli Lilly's ex parte application for the interim injunction had been attended by such serious non-disclosure that the original order should be discharged. Eli Lilly disagreed, and applied for the ex parte relief to be continued.

Mann J, holding for Eli Lilly, continued the injunction. In his view

* Eli Lilly had an arguable case that its trade marks were being infringed. The ECJ ruling in Case C-405/03 Class International BV v Colgate-Palmolive Co (noted here by the IPKat) suggested that the holding of goods under Customs warehousing procedures or external transit procedures was not, without more, an import. The same was very likely to be true of the inward processing relief system. However, while the ECJ was saying that putting the goods into free circulation within the European Union constituted an import, it was not saying that nothing short of such an act would be capable of amounting to an import.

* It was properly arguable that the impression given by the method of distribution used in this case was that the drugs had an English origin. That, coupled with the manner in which the goods arrived in the UK, made it arguable that this case was distinguishable from the more ordinary transshipment cases envisaged by the ECJ in Class, and that the acts amounted to "importing" within the meaning of s.10(4)(c) of the Act.

* The fact that the drugs were placed in anonymous packaging in Turkey did not necessarily mean that the importation was not under the mark. It was more likely that the expression "under the sign" qualified the goods, rather than the act of importation, the goods being under the sign if they bore it or were associated with that sign.

* The balance of convenience was in favour of granting an appropriate injunction until trial, given that the reputation of Eli Lilly's trade marks in relation to its products was at stake. Any damage done to it would not be easily remediable.

* Two out of the three allegations of non-disclosure raised by PM failed. The subject of the third allegation, while amounting to culpable non-disclosure, was not of itself sufficient to justify discharge of the original ex parte injunction.

The IPKat concurs with this. If everyone trading in the drugs knows what they are and who is making them, but seeks to circumvent the trade mark right by blanking out the marks and taking a devious shipping route, while the "course of trade" is effectively British, it makes good sense in pre-trial proceedings to look at the substance of the transaction rather than at the niceties.

Left: the IPKat blasts off from Ankara, seeking a new route to the United States that does not cross UK air-space

There will be plenty of opportunity for the court to take a more literal view of the scope of trade mark protection once the merits of the argument are properly aired. Merpel adds, the main problem here is that the ECJ in Class International only did what it was supposed to do, and considered the law on the basis of the facts before it: it's quite likely that each trade dodge that seeks to circumnavigate the notion of putting goods into circulation within the European market, will be separately tested with an ECJ reference.